What’s Up With Gold?

WHO IS BUYING?

DIFFERENT VIEWS FROM DIFFERENT COUNTRIES

The classic gold standard that was uniformly in place for all the world’s economies from 1880 to 1914 is what the world needs now. Budgets of countries that adhered to the gold standard were generally in balance.  As far back as the founding fathers of the United States, the framers of the Constitution recognized gold and defined money as “coin” was historically constructed of valuable metals.

As investors around the world digest the current state of economies, they are becoming more concerned about global issues and are fleeing to gold as a safe haven for their investments.  The current debt crisis has already been dealt with in Greece. Plans are being formulated to rescue Ireland. Spain is teetering on the edge.

Free trade issues are taking a new tack in financial discussions. The two key summits, especially the one most recently in South Korea left nothing but questions on the issue.  The Federal Reserve’s latest action to issue $600 billion in new currency only stoked the inflationary fire.

The virtual rarity of the gold is what establishes its acceptance around the world.  Since the beginning of time, the total amount of gold mined is estimated to be 142,000 metric tons. 

The largest holders of gold are:

1.      The United States Treasury is estimated to have 261 million ounces on hand.  This represents 8.133 tons of gold.

2.    Indonesia has already announced it is returning to the gold standard.

3.    A little over one third of all the gold is held by investors and central banks.

4.    India holds over one third of all the gold in the Far East.

5.    China has bought more gold in the last three years than the People’s Bank holds in total.

6.    A proposal to back SDRs (Special Drawing Rights) by gold and other currency is receiving more support every month.

7.    Virtually every single central bank is accumulating gold.

8.    The BIS (Bank of International Settlements) has a large hoard of gold.

9.    Almost all of the ETFs (Electronic Traded Funds) had substantial holdings of gold.

10.  Warren Buffett is stockpiling gold.

11.  George Soros controls 16 tons of gold.

12.  Carlos Helu (the world’s richest man) is buying gold and outright purchasing working gold mines.

13.  Eike Batista (ranked number eight in the world) is buying gold.

14.  John Paulson has stated that 80% of his $12 billion are invested in gold.  

His total gold holdings are 20 tons.

15.  Since President Obama’s inauguration the stock market is up 45%, but gold is up 66% and gold mining stocks are up 108%.

16.  Many ETFs are acquiring gold without having to disclose this information publically.  A good example of this is George Soros Fund Management LLC making Soros the largest holder of gold among American citizens.  Since there is a 45-day lag in reporting for hedge funds, we won’t see the recent run-up in gold prices by these firms until early next year.

17.  China Investment Corporation is buying gold.

18.  The SPDR Gold Trust hold 1.1 metric tons.

19.  India recently bought 200 tons from the International Monetary Fund in October.

Manmohan Singh, the Prime Minister of India is pleased with the economy and growth in India, but says high unemployment in the industrial countries threatens a revival of protectionist sentiment.  He said that all of the countries must avoid competitive devaluation, deficits must be dealt with, structured reforms to increase efficiency must be implemented and finally, the exchange rate must be flexible enough to deal with the world’s financial problems.

Robert Zoellick, the President of The World Bank, writing an article for The Financial Times, said we must consider gold to instill confidence of financial markets.  Gold would provide a system of an international reference point for each country’s expectations about inflation, deflation, and future currency values.  He said that the world needs to move to a new phase like the Bretton Woods agreement that began after World War II, when almost all international economies were rebuilt under a United States dollar that was fixed to gold.

Dr. Antal Fekete noted that gold is the only ultimate extinguisher of debt.  The world’s monetary gold should be remobilized by opening the United States Mint to the free and unlimited coinage of gold.

There are two types of people who don’t want to see a return to the gold standard.

1.      Paper money racketeers who profit from fiat money.  They will do almost anything to prohibit gold from becoming a standard again.

2.    Those that say that gold standards limit and constrict economic growth.

The members in the second group are generally spokespersons for governments and the banks and individual speculators in debt instruments.  Which leaves us with the first group and these are the people who practice fractional lending and fiat money printing.

A return to the gold standard would take us out of the financial whirlpool we find drowning us and let America and the rest of the world return to solid footing.